August 28, 2015 – Competition is essential to the successful development of a vibrant and world-class service sector and opening the market to foreign-invested service providers on a level playing field is key to China’s future economy, a report released by the American Chamber of Commerce in China said today. Titled Opening China’s Service Economy:
Opportunities and Challenges, the report also emphasizes the importance of agreeing a high-quality bilateral investment treaty between the U.S. and China that goes further in addressing the concerns of American companies grappling with the unique market conditions in China.
“An open, dynamic and innovative service sector has the potential to transform China’s economy,” said AmCham China Chairman James Zimmerman. “Unlocking the potential of services in areas such as the financial sector, healthcare, education, and logistics would bring immense benefits to Chinese people and the companies they work for.”
Services Crucial to Economic Rebalancing and Growth
Since the start of the decade manufacturing output growth has halved to below 7 percent, and more than one in five AmCham China members involved in the resources and industrial sectors have moved or are planning to move capacity outside of China due to rising costs. The contribution of services to GDP is increasing, but remains below 50 percent, compared with around 80 percent in the US.
Today, the free and open foreign investment climate in the US has greatly contributed to the success of the service sector, and brought firms from around the world to compete and create high-skilled jobs for Americans. AmCham China believes that similar market openness can have a comparable impact in China. Nevertheless, while in a survey conducted last year 72 percent of AmCham China’s service member companies expressed optimism about growth in the domestic market, only 25 percent were optimistic about the regulatory environment.
Report Addresses Cross-sector Obstacles to Progress as well as Sector-specific Recommendations:
- Banking, Capital Markets, and E-Payment
- Construction, Engineering, and Design
- Healthcare Services
- Information and Communications Technology
- Legal Services
- Media and Entertainment
- Real Estate
- Retail, E-Commerce, Distribution, and Logistics
Benefits of a High-Quality Bilateral Investment Treaty
Many of the most restricted sectors are in services, so the U.S.-China Bilateral Investment Treaty will have most impact in this area, providing long-term assurances for investment in China’s future. AmCham China hopes that both the US and Chinese governments see the benefit of cooperation in concluding a high-standard treaty as soon as possible. AmCham China urges both sides to review the concerns listed in the report and consider their likely adverse impact on future US investments and operations in the service sector in China.
In the report AmCham China strongly recommends significant improvements in:
Transparency and Due Process: Unclear investment approval procedures, lack of information regarding regulatory decisions, and the inability to access open and fair dispute procedures have been a primary concern reported by the majority of AmCham China service members.
Data localization: A series of recent draft laws and regulations propose measures that would greatly limit the ability of service providers to effectively use data within their global infrastructures and supply-chains, limiting the positive impact of future openings.
Government support for state-owned enterprises and designated monopolies: Numerous service industries in China face an uneven playing field due to government support for state-owned enterprises and designated oligopolies within their sectors. Such government preferences, and the benefits the state-owned enterprises receive, restrict both foreign and domestic companies’ ability to operate in the market.
Licensing regimes that cater to domestic companies and state-owned enterprises: Due to the existence of superseding industrial policies, our members are concerned that existing procedures under China’s domestic investment regime will continue to adhere to policies that discriminate against foreign-invested companies.
Overly broad definitions of national security: China’s new National Security Law includes broad economic, cultural, and social interests in its definition of national security, raising concerns as to the potential impact of national security reviews on foreign investment in the service sector.
A bilingual version of the report can be found on the AmCham China website.
About AmCham China
The American Chamber of Commerce in the People's Republic of China is a non-profit, non-governmental organization whose membership comprises more than 3,800 individuals from over 1,000 companies operating across China. The chamber's nationwide mission is to help American companies succeed in China through advocacy, information, networking and business support services. AmCham China is the only officially recognized chamber of commerce representing American business in mainland China. With offices in Beijing, Tianjin, Dalian, Shenyang and Wuhan, AmCham China has more than 60 working groups, and holds more than 300 events each year. Visit: www.amchamchina.org
For more information, please contact:
Tel: (8610) 8519-0835
Tel: (8610) 8519-0835